PC Hardware retail margins, what really are they?

PhoenixUK

PhoenixUK

PhoenixUK

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As in topic,

I bet many of you would swear for the fact that they're really low and many will say that it's usually as low as 5% but browsing through most retailers, even in comparable sizes you could easily see that just the price between them can vary as much as 15-20% sometimes, now adding their profit on top of that how much really are they making?

Speaking from my high street retail experience I could say that some of them were up to 20-30%.

Now seeing that prices vary that high just online and that most high street stores will have prices higher than the online ones you could go pretty high.

Is it just me or the (e)retailers use the current market condition and currency exchange rates just as an excuse for higher prices where in fact they're making more money?
 
Spie's not driving around in K plate Escort is he? But then he runs a very successful business so why should he?

Why the interest? Your last paragraph sounds like your saying e-tailers should be cheaper? Well they are cheaper! What’s your issue? E-tailers still have overheads.

Margins are set for all companies at whatever the market will bare and in an online business prices (including the margin part) are what get people “through the door” electronically.

If you’re asking why there’s a price band between e-tailers? It can be allot of things exchange rate as you mentioned is one important factor but purchasing power and the skill of the people doing the buying are also big factors.

Then there’s sales strategy: Do I sell hard drives at less margin to gain customers and make more on graphics cards? Or do I sell graphics cards for less margin and make it on hard drives? Of course online this doesn’t work as well as in bricks and mortar stores but it’s still a factor.

A 20% price spread isn’t that much really if you consider all the factors involved, just make sure you’re not buying at the high end of the curve.
 
Don't quote me on figures because I forgot the exact ones when I [randomly] looked at OcUK's accounts a while ago, but I think their turnover was around £40m and profit was shy of £3m.

The margins for high-street retailers will be much higher because they add tens of pounds onto the price they sell at.
 
You know how competition works, right? Computer parts are discrete components, where direct comparison of prices is not only possible, but easy. This means that many people will shop around for the best price. This in turn mean retailers must sell as low as they can to get a sale, meaning it is volume which matters, not mark-up: generally bigger companies will prosper and smaller will fail. Shop prices are higher than e-tailer prices because the overheads are much higher. If you try raise your own prices higher than your market will bear, you go out of business because people stop buying from you.



M
 
as already said above the margins aren't as high as you'd think

bear in mind these companies will have massive outlays

warehousing, web presence staff tax etc etc etc

i would imagine that by the time you factor all the above on a per item basis you'd be looking at razor thin margins on most products.

people outside a business seem to forget the overheads and running costs of a business.
a lot of a companies success can be put down to its purchasing staff getting good deals etc if company a buys a new cpu in £5 cheaper per unit they can put it out £5 cheaper than company B who paid more and still make the same profit margins,

i could go on all morning but i wont. suffice to say any business has costs involved and with a company the size of ocuk those costs will be rather high, profit comes through volume sales and as previously mentioned turnover of £40 million making a profit of £3 million is actually pretty good for an electronics seller. but bear in mind thats still less than 10%
 
It's too early to read the OP due to the rubbish choice of font colour but, their margins are as high as they can make them while remaining competitive and keeping up their level of service. Keeping a business going is a VERY expensive thing to do.

Even if the profit on individual good is 65% or something (most likely a lot less) most of that will be soaked up on various outgoings.
 
I was the second post not the OP and the font colour was because i did a quick spelling check and pasted the results back in without realising it would take the font as well.
 
when I worked for a large reseller the margin was 7% on PC's

I would assume its going to be about that on most PC items brought over the internet... (possibly less)
 
I work "in the business" so to speak and I can attest the margins are very small. Price differences you see a a combination of factors:

Dollar rate
Manufacturer/supplier promos or rebates
Haggling skill of buyers
Buy in price (this varies dependent upon many factors such as ordering volume/rebates/how much margin they're after)
How flexible a business is

Some business stick rigidly to margins like their lives depend upon it. They buy in product X and expect to sell it for Y amount, regardless of price reduction in subsequent stock for X. Normalisation for the win!

The biggest margin can be made in the smallest sales tbh. Cables and USB crap usually. OcUK don't involve themselves in service but that's about the best margin maker in IT retail. That and finance.
 
d_brennen said:
The biggest margin can be made in the smallest sales tbh. Cables and USB crap usually. OcUK don't involve themselves in service but that's about the best margin maker in IT retail. That and finance.
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That doesn't actually surprise me in the slightest. I recall not too recently I wanted a USB Extension lead in a hurry and went in to a few of the usual high street electrical retails.

Cheers for £25+ for a Belkin 3m cable....£25!! The 5m one was £32 iirc! What a blasted joke. Given the cost of making it.

Needless to say I did not buy one and walked out in disgust, glaring at all the staff in the process :D
 
Knubje said:
That doesn't actually surprise me in the slightest. I recall not too recently I wanted a USB Extension lead in a hurry and went in to a few of the usual high street electrical retails.

Cheers for £25+ for a Belkin 3m cable....£25!! The 5m one was £32 iirc! What a blasted joke. Given the cost of making it.

Needless to say I did not buy one and walked out in disgust, glaring at all the staff in the process :D
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That is a joke for a USB extended cable tbh but you have to appreciate it's there, in front of you ready to walk away with. If you absolutely need an item there and then the price is less of a issue

I once worked for a Tommy Cooper look alike who, when confronted by a customer saying "I can buy this for £x from Y online retailer" he'd reply "Y doesn't have to stand here taking to the likes of you!"

Never failed to raise a smile
 
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I know all that but what im trying to figure out is HOW possibly there could be 15-20% difference between SAME SIZE (e)retailer. Obviously same size company should be able to order around same amount of items for around same price?

How can there be say 20GBP diff on 100GBP item between 1 and 2 or 3 different etaileres where all of them are about same size companies.

I'm not saying between highstreet vs online.

It would put it down to the hardware buying people, but can they really knock off that much of a difference ?

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And yeh, high street shops are big rip offs most of the time, especially with dell/hp likes of PC systems. I've quit one of my jobs in London because I couldn't stand trying to justify the cost of 1200GBP HP PC with E6300 and GF7600 where at that time you could buy Q6600 with 4870 for half the price, brand new and built up for you.

We also had customers paying 100quid for putting a new memory in a laptop ( excluding the price of memory ) but that's a different story !
 
I work at a school and we use a number of e-tailers. A very local and small one does our cables very cheap.

We can pay as little as 50p for some sort of USB cable yet or bigger companies we get laptops and desktops from charge £10~ for the same cable.

Most profit must be made on these sort of items.
 
PhoenixUK said:
We also had customers paying 100quid for putting a new memory in a laptop ( excluding the price of memory ) but that's a different story !
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Quite.

The service industry, whether it is IT or not, is always one that will command high prices. However, it is not a matter of simply charging more for the same product to cover overheads or to 'rip people off', rather, it is more a case of charging a price that people are willing and happy to pay to have a service done for them. One that they either lack the ability, equipment, knowledge or time to do themselves.

I don't think the cost of a service is comparable to buying an item 'off the shelf'
 
Retail is about volume and turnover, many products can be sold at a loss because it draws custom, make £1 on an item worth £50 and it looks daft, sell a few hundred thousand because you have the capacity to do so and suddenly the whole setup looks more attractive.

Supermarkets are balance very much in this way, they sell many products at cost or below just to outpace their competitors, they know that a few bargains will draw custom and typically other purchases along the way.

A business of this ilk is less worried about margin and more concerned with turnover.
 
platypus said:
Hardware resellers have large profit margins.
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its tin shifting, certainly when i worked in distribution we would be happy to achieve 5% on standard boxes, I doubt in such a highly competitive marketplace with price comparisson sites resellers would command a lot more.

services are where the profits are really generated, combine them all (in sw) and blended margins are usually pulled down by hardware
 
When I used to help run a computer parts company online we would get the stock list in from the distributor, add on (i think) 10% and then upload the changes to the site. We had to do it every week because of the constantly changing prices. We would always be able to beat some of the big companies because some would just crank prices up to catch people unawares.

Eventually the guy running it stopped as there is just so much competition these days. Plus some people can get some stuff cheaper so being a small company meant he had little or no chance.
 
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